Shares of Apple, the biggest company in the S&P 500, spooked Wall Street on Wednesday by forming a death cross, an indicator often used by technical analysts as a sell signal.

The market selloff in the past week exacerbated losses in Apple shares, which are now off by 20 percent from their record price of $134.54 hit on April 28.

As investors appear to take money off the table, technical analysts are closely monitoring a breach of the short-term moving average through the long-term trend, a phenomenon also known as a "death cross."

The main reason for concern, according to market watchers, is the size of Apple, which has a market capitalization of $592 billion—by far the biggest in the S&P index.

Apple, 5 Years

Source: FactSet

"The likelihood of the bull market staying intact without Apple is remote," Clearpool's chief market strategist, Peter Kenny, said earlier this month as the stock retreated from its high.

This is because the company has been the driving force in the Nasdaq and the overall tech sector, which has the biggest weighting in the S&P 500, Kenny said at the time.

Analysts say one of the main issues for Apple now is the company's exposure to China, which accounted for about 25 percent of iPhone sales last quarter.

According to analysts' estimates, the iPhone is the driving force behind Apple's revenue, accounting for about 66 percent of sales this year, while that figure jumps to about 85 percent for operating profit.

In the past five years, Apple shares formed a death cross only one other time.

That instance took place in December 2012, when the stock fell about 27 percent five months after that formation.

"Fading AAPL two weeks ahead of the release of a new iPhone after a 20 percent decline based upon a 'death cross' may not be a strong play," Evercore ISI's Rich Ross said Wednesday. "While risks remain to the AAPL story and the AAPL chart, I remain a better buyer."

To be sure, not everyone is as bullish.

"We see mixed signals for AAPL," Ari Wald, head of technical analysis at Oppenheimer & Co., said Wednesday. "The stock is oversold near $100 support, but also faces formidable resistance on the way back up after breaking important support levels on its drop. Overall, we'd like to see the stock stabilize for longer before becoming active again on the long side."

Correction: A previous version of this story misidentified an event in September 2013 as a death cross.